6 The local technology store WiredIn hired you to manage their inventory, whichconsists of 2 products configurations, type L and type J. Below are the data for the products.The holding cost is 24% of the unit costs.ProductDemand per year DUnit Cost COrdering Cost AType L48000 (units)$50$125/orderType J72000 (units)$85$125/orderA. Use the economic order quantity model to determine the order size for productsType Land Type J (assuming they are ordered independently).B. Calculate the total relevant cost associated with the EOQ calculated in part (A)(for Type L and Type J).C. Assume that the real ordering cost is $200 instead of $125. How large are theadditional relevant costs incurred by the bad estimate of the ordering cost for Type J?D. If WiredIn chooses to order 1300 of Type L instead of the EOQ, calculate thepercentage cost error of this order size.

Economic order quantity is the optimal quantity that an organization order to minimize the total…

Answered: 6 The local technology store Wired In…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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At Dot Com, a large retailer of popular books, demand isconstant at 20,400 books per year. The cost of placing anorder to replenish stock is $35, and the annual cost of holdingis $6 per book. Stock is received 5 working days after an orderhas been placed. No backordering is allowed. Assume 250working days a year.a. What is Dot Com’s optimal order quantity?b. What is the optimal number of orders per year?c. What is the optimal interval (in working days) betweenorders?
Hammonds Corporation is trying to decide between two alternate order plans for itsinventory of a certain item. Irrespective of the plan to be followed, demand for the item isexpected to be 1,000 units annually. Under Plan A: order costs would be $ 40 per orderand inventory holding costs (carrying cost) would be $100 per unit per annum. Under PlanB order costs would be $30 per order, while holding costs would be 20% of unit cost whichis $480.Determine:i. the economic order quantity for EACH plan ii. total inventory cost for EACH plan iii. hence, indicate which plan would be better for the company
The demand for a clothing brand is shown in the table below. The cost per order is about $4000. Cost of each unit of clothing = $5. Carrying cost percentage = 25% per item per 5 months. The analysis period = 5 month duration. Month Demand 1 400 2 300 3 200 4 400 5 500 a. Using this data, compute the solutions using the Lot for Lot and Periodic Order Quantity heuristics? Which of these heuristics would perform better and why? b. Assuming that the demand follows a normal distribution with the mean and variance from the data given above, determine the optimal order should be greater or lesser than the single period EOQ model.
Penalty costs can be assessed only against the number of units of demand that cannot be satisfied, or against the number of units weighted by the amount of time thatan order stays on the books. Consider the following history of supply and demandtransactions for a particular part:Number of Items Demand duringMonth Received MonthJanuary 200 520February 175 1,640March 750 670April 950 425May 500 280June 2,050 550Assume that starting inventory at the beginning of January is 480 units.a. Determine the ending inventory each month. Assume that excess demands areback-ordered.b. Assume that each time a unit is demanded that cannot be supplied immediately,a one-time charge of $10 is made. Determine the stock-out cost incurred duringthe six months (1) if excess demand at the end of each month is lost, and (2) ifexcess demand at the end of each month is back-ordered.c. Suppose that each stock-out costs $10 per unit per month that the demandremains unfilled. If demands are filled on a first-come,…
The demand for a certain article is 400 art/month. The ordering cost is $35 and the storage cost is $10/month. The purchase cost is $15 but if 70 items or more are purchased there is a discount andThey drop at $10. a) Obtain the optimal amount of inventory Yb) Obtain the total cost of inventoryc) Is it convenient to accept the discount?d) What is the cost of inventory with quantity m?
The inventory management costs for a certain product are S = $8 to order, and H = $1 to hold for a year. Annual demand is 2400 units. Consider the following ordering plans: (i) Order all 2400 at one time (ii) Order 600 once each quarter (iii) Order 200 once each month Calculate the annual holding and setup costs associated with each plan. (iv) Is there another plan, cheaper than any of these? Calculate this order quantity along with its total annual holding and setup costs.
An organization manufactures supplies for landscaping companies which has an annual demand of 16,000. The cost of storing each unit is $2.5/year and $50 to make an order. Say the company has 300 days of annually, answer the following questions: a. What is the optimal order quantity? b. How many orders in a year? c. How many days between orders? d. How much is the total inventory cost?
c. Once you find the optimal order quantity i.e., EOQ, create a Data Table that generates inventory cost within ±100 units (with 10units increment) from the optimal order quantity. For example, if the EOQ=150, then you need to generate Data Table for inventory cost starting from 50 to 250 with 10 increments. Explain the exact steps completed in excel to create the data table d. Create a Scatter plot with “smooth lines” for the Data Table created in c) to show the inventory cost. Label your plot clearly (axis and title). The optimum order quantity should indicate the minimum cost in your plot.
Suppose demand is know and constant at 500 units per year (one year has 250 working days). The holding cost is $2 per unit per year and the ordering cost is $20 per order. Also assume that the lead time is 10 days. Compute the optimal order quantity (EOQ) and the optimal annual inventory cost. Draw a picture of the evolution of the inventory level with time. Indicate the ROP on the picture as well as the length of the cycle. Now assume that the lead time is 90 days. Indicate the ROP on the picture.
Custom Computers, Inc. assembles custom home computer systems. The heat sinks needed are bought for $12 each and are ordered in quantities of 1300 units. Annual demand is 5200 heat sinks, the annual inventory holding cost rate is $3 per unit, and the cost to place an order is estimated to be $50. Calculate the following: (a) Average inventory level (b) The number of orders placed per year (c) The total annual inventory holding cost (d) The total annual ordering cost (e) The total annual cost
Suppose that a product with an annual demand of 2400 units, a setup cost per production run of $8, and a holding cost of $1 per unit per year. With 200 working days in a year, conisder the following ordering plans: 1) order 600 units once each quarter and all 600 units will be delivererd in a single day 2) order 200 units once each month and all 200 units will be delivered in a single day 3) order 120 units each 6-month, and each order will be delivered over a period of 60 days a) Suppose that the items will be delivered at a rate of 40 pieces per day, what is the minimum overall costs in this case? b) Which ordering strategy has the lowest overall cost and why?
The two most important inven tory-based questionsanswered by the typical inventory model are:a) when to place an order and the cost of the order.b) when to place an order and how much of an item to order.c) how much of an item to order and the cost of the order.d) how much of an item to order and with whom the order should be placed.

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